Stock Rippage Secured: Cloud Security Stocks Take Off
An article by • Published Dec 4, 2020
Three Cloud/SaaS software names - CrowdStrike Holdings, Inc., Okta, Inc. and Zscaler, Inc. - reported Wednesday afternoon resulting in a triumvirate of strong growth.
$CRWD 3Q +86% y/y, with trailing revenue decelerating by 50 bps
$OKTA 3Q +42% y/y, with trailing revenue decelerating 80 bps
$ZS 1Q +52% y/y, with trailing revenue accelerating 560 bps
The stock reactions were impressive, CRWD finished +14%, OKTA +5% and ZS +27%
Okta discussed the 3 Mega Trends driving its business, which really apply to all 3
Adoption of cloud and hybrid IT
Zero trust security
The 3 mega trends that have been driving our business for the past several years, the adoption of cloud and hybrid IT, digital transformation and Zero Trust security are being accelerated. Organizations are being forced to evolve their digital strategy to navigate through the pandemic, while their remote work environments remain a critical part of their business.
CrowdStrike discussed its positioning in Zero Trust security
Based on IDC estimates, we believe the identity protection market will be a $2.2 billion market in 2021. CrowdStrike is a leading security provider in the market with a Zero Trust approach that combines endpoint and workload protection with identity protection, behavioral analytics and AI.
As the pioneer in cloud-delivered endpoint and workload security, we believe CrowdStrike has created a winning formula to gain new customers at a rapid pace, displacing both legacy and next-generation vendors. As you may recall, last quarter, we joined forces with Okta to help customers adopt a modern, identity-centric Zero Trust security ecosystem. This quarter, we are thrilled to announce that Okta is now a CrowdStrike customer and excited by this opportunity to deepen our relationship.
Zscaler claims it is the largest in-cloud security platform in the world
We are seeing customers increasingly migrate away from their large installed base of legacy on-prem, gateway and security appliances to pursue direct-to-cloud architecture. In one new customer win, a Fortune 50 retail customer, replaced a legacy web gateway with ZIA for cybersecurity and data protection.
Moving on to ZPA. Our customers view ZPA as the foundation for the architectural shift to zero trust access for private applications. Our platform eliminates the Internet attack surface of customers' applications, resulting in reduced business risk. ZPA is the clear market leader with proven maturity and scalability. We are supporting hundreds of large enterprises in the complex, multi-cloud environment.
The growth of these three names is intertwined. CrowdStrike to promote Zero Trust security for remote work. Zscaler to combine its cloud security platform with real-time threat detection.
CRWD discussed continued growth post-COVID
Robbie David Owens • Piper Sandler & Co., Research Division • MD and Senior Research Analyst
I guess I want to start with the net customer additions and just the velocity that you're seeing. And I guess it's -- you touched on it a little bit earlier, but why here? I mean we probably saw the COVID trade or the play in the March quarter and the June quarter, yet you're showing even more meaningful acceleration here. Is there some reason you're hitting an inflection point in your business at this point?
George R. Kurtz • CrowdStrike Holdings, Inc. • Co-Founder, CEO, President & Director
Hey, Rob, yes, George here. So you hit the nail on the head. To be clear, when we think about laptop purchases, that's well behind us, right? We're talking about real transformation, real adoption of our technology, consolidation of agents and winning in the market because we've got the best technology solving really big problems that are even beyond security. And that's why you've seen an acceleration in customer adoption. As I mentioned earlier, it's across the board. It's not just enterprise. It's not just mid-market. It's not just SMB. It is across all of those particular areas because the technology works and we're saving companies lots of money and delivering lots of value. So -- and when you think about sort of the COVID piece of it, as I mentioned, that's well behind us. And this is a much more sustainable trend that we see for the foreseeable future as people move to the cloud and transform digitally, they have to have their security transformation as part of that.
OKTA couldn't have been more bullish on the next few quarters
So not only is Q4 looking very good, but I'm very optimistic about the first half of next year as well. I think the pipeline is looking very, very good. And not only in North America, but again internationally, there's a big opportunity. We talked about opening the Tokyo office. We're going to continue to accelerate our growth there. We already have great organizations, Siemens, Zurich Insurance, ENGIE. These are large brand names that have standardized internationally on Okta. But there's a lot more that we can do, and I think that the future quarters are going to be very good from that perspective as well.
Zscaler founder and CEO gave a great lengthy explanation of what they do and why they will keep growing at the CS Technology Conference the day after earnings
Jay Chaudhry • Zscaler, Inc. • Founder, President, CEO & Chairman of the Board
Excellent. I'm going to take only a few minutes to set the stage. So first of all, this is what a typical enterprise network looks like. We call it hub-and-spoke network for obvious reasons. And to enable and protect the network, you need all this stuff in the data center. These are terminations of domestic WAN to international to extranet to Intra-DMZ and B2B, B2C zones. Beautifully color-coded as routers and firewalls and UTMs and load balancers and more and more. This was wonderful when data center was the center of the universe, and you needed to protect it, you need to have fast access to it.
Fast forward, the world of cloud applications are everywhere, users are everywhere. Traffic flows over the Internet. All of us are sitting at home. Now don't really use any of that corporate network. The castle has gotten empty because applications are sitting in the cloud or there are SaaS applications. So the right way to do it is, to have a new concept of Zero Trust Exchange. Think of it as an electronics exchange, maybe in layman's terminology. It is an intelligent switch board. A user comes to our exchange. We verify who you are using identity of your choice, and we look at the policy. If the policy, say, yes, we connect you to the right application or service. There's no such thing as inside the network, outside the network. Network is merely the transport in this model, you securely connect users, devices and applications over any network. Simplifies model, makes -- gives you far better security.
Now this whole transformation, digital transformation can be looked at in 3 simple steps: the first step driven by CIO. Modernize my application, move them either to SaaS or to a public cloud where I can build and deploy them faster. Great. That's being done, CIO is #1 priority because business is all about applications. But if you do it, your expensive hub-and-spoke network which backhauls traffic to the data center becomes a problem. It's cost issue. It is user experience, response time issue. Who wants to fly from San Fran to Chicago via Houston? I don't. I would rather take a direct flight. So every branch office wants to go direct. But there's a problem because the security is sitting in the data center. That's where we come in.
With Zscaler as an electronic exchange, sitting at 150 locations around the globe. So your users could be sitting anywhere, at home, or coffee shop, or airport, it could be your employees, it could be your B2B customers. They simply come to us, we validate who you are. When you want to go to external applications like Internet or SaaS, we are inspecting traffic like an international airport. Do you have the right boarding pass, the passport, the visa and the luggage is all safe, to make sure you can have great experience while we're keeping you safe from fishing, ransomware and make sure nothing leaks out of your company. That's one piece.
The second piece, there are internal applications. In your data center, public cloud that you typically go through with the VPN or being in the office. With Zscaler, no need to worry about either of the 2. You come to us. We securely connect the right user to right application without VPN and/or the like. So we enable anyone to work from anywhere with full policy, full security, great response time. And get viewed as foundation of your application, network and security transformation. We're not get viewed as just a security company where you say, where are you going to put my box, right?
So your complicated network I show it on the left gets simplified to this architecture with tons of cost saving with wonderful user experience, and with much, much better security than you have today.